Proceeding 7

th
International Seminar on Industrial Engineering and Management
ISSN : 1978-774X

Selection Of Open Source ERP
(Wiwid Dolianto) DSS-79

SELECTION OF OPEN SOURCE ENTERPRISE RESOURCE PLANNING (ERP)
SYSTEM FOR FURNITURE MANUFACTURING SMEs AS A COMPETITIVE
STRATEGY

Wiwid Dolianto
1
, Zulfa Fitri Ikatrinasari
1

1
Master Program in Industrial Engineering, University of Mercu Buana, Jakarta
wiwid.dolianto@yahoo.com zulfafitri@gmail.com

ABSTRACT
Enterprise Resource Planning is very important for the progress and growth of the company at
the present time. Competition is very strong among companies with different advantages
making the quality and effectiveness of a company is strongly needed. Enterprise Resource
Planning is one of the solutions that makes all data could be seen by everyone in the same
interface and single database. Open source ERP System is the alternative options that can be
used by Small Medium Enterprises (SMEs). Open source ERP system with a free license offer
solutions for SMEs that have constraints in terms of finances and human resource. This study
discusses about SMEs manufacturing furniture, business processes and selection of open
source ERP system using Analytical Hierarchy Process (AHP). The result of this study is an
open source ERP system selection process in accordance with the SMEs process business:
finance, material management, marketing and customer, production and distribution. Final
result Compiere obtained with weights 0.472, 0.401 for Openbravo and Adempiere 0,127.
Keywords : Enterprise Resource Planning (ERP), Open Source System, Small and Medium
Enterprises (SMEs), Analytical Hierarchy Process (AHP)


1. INTRODUCTION

Small and Medium Enterprises (SMEs)
is currently an economic power of its own
based on small businesses, managed and
developed by the community. SMEs in
Indonesia have been able to contribute to
Indonesias GDP by 57.12% based on data
of the Central Bureau of Statistics, 2012.
Small and Medium Enterprises are types of
small businesses managed by individuals
and groups. The Central Bureau of Statistics
classifies the type of industry based on the
number of employees: for small enterprises,
the number of employees is 5 ~ 19 people
with a maximum turnover of 1 billion rupiah
per year; for medium enterprises, the
maximum number of employees is 99
people with a maximum turnover of 100
billion rupiah per year (Handayani et al,
2013). According to Law Number 20, 2008
on SMEs, Micro Enterprises have maximum
total assets of 50 million rupiah with a
maximum turnover of 300 million rupiah.
Small Enterprises have assets between 50
million rupiah up to 500 million rupiah with a
turnover between 300 million rupiah up to
2.5 billion rupiah. And Medium Enterprises
have assets between 500 million rupiah up
to 10 billion rupiah with a turnover between
2.5 billion rupiah up to 50 billion rupiah.
The definition of SMEs according to
foreign institutions and other countries as
written by Bryant et al. (2011) among others
are based on the number of employees,
revenues and total assets. The World Bank
divides SMEs into 3 types, namely medium
enterprises with a maximum number of
employees of 300 people, annual income up
to $ 15 million and total assets up to $15
million; small enterprises with a number of
employees less than 30 people, annual
income not exceeding $ 3 million and total
assets not exceeding $3 million. Japan
divides SMEs by several criteria, among
others mining and manufacturing, with a
maximum number of employees of 300
people or an amount of stock capital up to
US$ 2.5 million; wholesale, with a maximum
number of employees of 100 people or an
amount of stock capital up to US$ 840
thousand; retail, with a maximum number of
employees of 54 people or an amount of
stock capital up to US$ 820 thousand; and
service, with a maximum number of
Proceeding 7
th
International Seminar on Industrial Engineering and Management
ISSN : 1978-774X

Selection Of Open Source ERP
DSS-80 (Wiwid Dolianto)
employees of 100 people or an amount of
stock capital up to US$ 420 thousand.
To compete in domestic and foreign
markets, SMEs need a new business
strategy development and to use new
technology (Caldeira, 2003). SMEs generally
have limited human and financial resources
so that they are less prepared and less able
to make changes (Caldeira, 2003). Saputro
et al. (2010) wrote that Enterprise Resource
Planning (ERP) application can be one of
the solutions to help SMEs to simplify,
integrate and automate business processes.
The ERP application that will be applied in
practice can reduce operational costs and
increase business performance, such as
improving consumer service and reducing
lead time. ERP applications can simplify and
facilitate a strong interaction between the
production department, the sales
department, the accounting department and
the marketing department, where each
person can be in one same yard.
Furthermore, by using ERP applications,
SMEs will be assisted in the development of
an understanding on how different business
processes can be integrated and have an
impact on each other on those processes
(Saputro et al., 2010). ERP based on open
source is present to offer ERP advantages
with a relatively cheaper investment cost
compared to paid ERP, and this is in
accordance with SMEs with issues of limited
funds. Considering the importance of the
use of ERP, then with this system to be
reviewed, it is expected that SME resource
planning as a whole will be optimized and
the performance of SMEs will be maximized
with the gain of a large profit. Open Source
ERP according to Open Source Initiative
(OSI) is as follows: 1) Distributed free of
charge, including its use as a basic
component in companies and without any
additional costs. 2) The source code must
be available in a format that is easy to read.
The focus of this study is whether the
open source ERP can be used to simplify
business processes of manufacturing SMEs;
what are the needs of the ERP modules
that are appropriate with the business
processes of manufacturing SMEs; and what
ERP system based on open source is
suitable for manufacturing SMEs. The
selection of open source ERP uses the
Analytical Hirarchy Process method with the
Expert Choice program. The study is limited
to 3 furniture manufacturing SMEs located
around Jakarta.


2. THEORETICAL BACKGROUND

The strict competition between SMEs
and large compnies, SMEs must seek
competitive superiority that can help them to
minimize cost and maximize profits.
Manufactiring SMEs currently require
changes in order to increase
competitiveness Saputro et al. (2010). One
of the strategies that can be done by SMEs
is using information technology to transform
business processes quickly, accurately and
efficiently. Case studies conducted in
Europe showed more than 50% productivity
is achieved through investment in
information technology (Van Ark et al.,
2003).


Figure 1. Hierarchy of selection open source
ERP

Fougatsaro (2009) mentioned 11
important factors that influence the success
of ERP implementation, namely: ERP team,
management change and corporate culture,
top management support, plans and vision
of the company, process business with
minimum customization, project
management, work evaluation monitoring,
effective communication, software
development testing and troubleshooting,
project leader, appropriate business and IT
legacy systems.
Handayani et al. (2013) in their study
wrote that the main process businesses
Proceeding 7
th
International Seminar on Industrial Engineering and Management
ISSN : 1978-774X

Selection Of Open Source ERP
(Wiwid Dolianto) DSS-81
required to standardize and formalize the
SMEs main business processes are
distribution, marketing, procurement and
production process. In this study, the
business process functions were obtained,
namely financial function, materials
management, marketing and customer. The
four process business functions become the
basis in the selection of ERP modules
needed by furniture manufacturing SMEs.
The need for SMES ERP moduls which are
translated from the main business processes
are: financial modul, marketing modul, CRM,
management order, production modul,
quality and inventory, as well as delivery
modul.


Figure 2. Business processes of furniture
SMEs


3. RESEARCH METHODS

Methods that can be used for the ERP
selection process with computational
intelligence techniques among others are
Weighted Scoring Method, Analytical
Hierarchy Process, Fuzzy Logic, Analytic
Network Process, Systematic Help ERP
Acquisition, Priority Matrix, Promethee, and
Technique for Order Preference by Similarity
to Ideal Solution (Comer, 2012). The
Analytical Hierarchy Process (AHP)
introduced by Saaty (1980) explains how to
determine priority from a group of data
alternative and the degree of interest of each
attribute in various criterias of decision
making. Saaty (2000) described the AHP
work principle, namely decomposition,
comparative assessment, priority synthesis
and logical consistency. In figure 1, data
decomposition based on criteria and sub
criteria as well as the chosen alternative
software are explained.
Boonyaprasit et al. (2010) wrote 6
selection criteria for open source system that
will be implemented in the selection of ERP
systems, among others: 1) Functional Fit, 2)
Flexibility, 3) Maintenance System, with
after sales service and training and updating
and inquiries sub criteria, 4) Implementation,
with customization and ease of integration
sub criteria, 5) Vendor, with vendor
reputation sub criteria, market share and
demonstration of previous implementation,
6) Cost, with software cost, consulting cost
and maintenance, and how to pay the
investment sub criteria; whereas alternative
options for open source ERP systems are
Compiere, Openbravo and Adempiere.
Compiere and Openbravo are selected
because both open source system were
selected as the top three best ERP systems
in 2009 (http://tech.gaeatimes.com) and in
2010 (www.forecastingclouds.com) based
on the research of Handayani et al. (2013).
Adempiere which is still a derivative of
Compiere was selected not only because it
was included in the top10 best ERP systems
(http://erp-software.findthebest.com), but
also because it is widely used in the
manufacturing industry.

Figure 3. Result weight criterias and total
score alternatives

This study uses the following flow of study:
1) Literature study on SMEs, ERP and open
source ERP. 2) Determination of SMEs for
Proceeding 7
th
International Seminar on Industrial Engineering and Management
ISSN : 1978-774X

Selection Of Open Source ERP
DSS-82 (Wiwid Dolianto)
study, i.e. 3 furniture manufacturing SMEs
around Jakarta 3) Survey of SMEs 4)
Interviews and questionnaires on the
process business and the selection of open
source ERP. 5) AHP data processing uses
the Expert Choice software. 6) The writing of
research results.


4. RESULT AND DISCUSSION

Research results show that there are four
business processes in the furniture
manufacturing SMEs, namely finance
function, materials management, marketing
and customer, production and distribution.
The four business processes represent the
business processes of SMEs for study. In
figure 2, it is explained that there is an agent
that serves as a bridge between SMEs and
customers. Customers can also directly
contact the SMEs marketing department in
ordering goods.


Figure 4. Expert Choice Head to Head
Compiere & Openbravo

The need for SMEs ERP moduls which
are translated from the main business
processes are: financial modul, marketing
modul, CRM, management order, production
modul, quality and inventory, as well as
delivery modul. The ERP modules are
needed based on research in the field and
may differ from the results of other studies.
The selection process of ERP open source
system suitable for the SMEs business
process was performed with results as in
figure 3, i.e.: the functionality criteria has the
highest criteria weight of 0.296, while the
maintenance and financial cost criteria each
have the same criteria weight, i.e. 0.208.
The implementation criteria has a criteria
weight of 0.174, the flexibility criteria has a
criteria weight of 0.071 and finally the vendor
criteria with a criteria weight of 0.041.
There are three alternative system
options, namely Compiere with a weight of
0.472 as the first option, then Openbravo
with a weight of 0.401, and Adempiere with
a weight of 0.127. Figure 4 is the result of
head to head between Compiere and
Openbravo. Compiere is superior in
functionality and Openbravo is superior in
flexibility. As an overall result, SMEs choose
Compiere as ERP open source software in
the first place, then Openbravo and
Adempiere as alternatives for second and
third choices.
In figure 5, the criteria final result and
choice of alternative system are described.
In the functionality criteria, Compiere has the
highest weight, i.e. 0.498.


Figure 5. Total result weight criterias & score
alternatives

Software functionality can be seen from
the number of tables (Herzog, 2006).
Compiere has 385 tables and capabilities in
terms of e-commerce, accounting,
inventory, and warehouse. The Openbravo
flexibility criteria has a weight of 0.559.
Openbravo is superior in flexibility, i.e. it is
web based so as to facilitate its users in
terms of mobility. Customization, upgrades,
internationalization, user friendliness,
architechture, scalability, security, and
interface falls under the criteria of flexibility
(Herzog, 2006). In the criteria of
maintenance, after sales service and
training, Compiere has a weight of 0.614.


Proceeding 7
th
International Seminar on Industrial Engineering and Management
ISSN : 1978-774X

Selection Of Open Source ERP
(Wiwid Dolianto) DSS-83
Compiere looks easier in terms of
maintenance, due to the architecture of
Compiere. Compiere allows meta data
based on customization on the fly without
shutting down the system (Herzog, 2006). In
the criteria of maintenance updating
inquiries, Compiere has a weight of 0.537. In
the criteria of implementation customization,
Compiere has a weight of 0.614. On
Compiere, customization can be done
without shutting down the database and is
supported by meta data stored in the
database with 114 tables called application
dictionary.
In the implementation integration criteria,
Compiere and Openbravo each have the
same weight of 0,444. Compiere offers a
comprehensive solution for the process of
integration and Openbravo with its web
service offers ease of integration from the
old system to the new system online. For the
vendor reputation criteria, Compiere has a
weight of 0.466 and differs a litttle from
Openbravo with a weight of 0.433. Compiere
and Openbravo are listed as the top three of
the best ERP software in 2009
(http://tech.gaeatimes.com) and in 2010
(www.forecastingclouds.com).
For the vendor market share criteria,
Compiere has a weight of 0.637. The market
share of paid ERP by 40% is controlled by
SAP and Oracle (Fougatsaro, 2009). The
rest is controlled by Microsoft Dynamic NAV,
Baan and open source ERP is dominated by
the top 10, including Compiere, Openbravo
and Adempiere. For the vendor
demonstration for previous implementation
criteria, Compiere has a weight of 0.644.
The Southern Book Company, Pertronix,
Johnson Controls Inc., and Construcciones
Explanaciones ECO SA are examples of the
successful applications of Compiere,
Openbravo and Adempiere.
For the criteria of financial cost
consulting and maintenance upgrade cost,
Compiere has a weight of 0.429. Compiere
can be deployed on premise or on cloud in
order to reduce the cost of consultartion and
maintenance. Hinweis (2004) wrote that the
Compiere cost for partner contract is USD
6000 and silver support at USD 3000.
Openbravo claims maintenance cost of
1500 euros plus 500 euros per user. Celeste
et al. (2010) stated that maintenance cost is
about 25% of the total initial implementation
cost. In the financial cost software cost,
Openbravo has a weight of 0.600.
Alphamedia consultant claims free software
cost in terms of lincenses, implementation
cost for around 50 million rupiah, training
cost for 25 million rupiah, as well as custom
fee at 4 million rupiah per man days.
Financial cost how to pay the investment
can be done by the SMES by determining
the cost scheme to be done on their own,
i.e. whether to buy software directly to a
vendor or to a consultant.
One of the major issues faced by SMEs
is the limited resources and financial
capability possessed. In addition, most of
the business processes owned by SMEs are
still done manually and only a small
proportion of SMEs are able to implement
applications to help their operational
activities, and most of the operational
activities done are still separated (Saputro et
al., 2010). The corporate organizational
culture apparently also contributes to the
situation. Such a situation may not have a
major impact because the number of
transactions carried out by SMEs is still low
and the volume of data is still possible to be
managed. Jutras (2010) in his study on
Enterprise Resource Planning in Small and
Medium Enterprises said that there are five
things that cause most SMEs in the world
not to implement the ERP applications,
namely: limited funds; SMEs feel that they
are already able to function effectively
without the help of an application;
application fee and consultation service that
is needed; as well as that ERP application is
too complex to use. There must be a strong
encouragement especially from the top
management (internally) as well as
encouragement from the government
(externally) that can provide opportunities, in
this regard, sales opportunities such as
export, as well as soft loans to SMEs. The
government, in this case the Ministry of
SMEs, the Ministry of Industries and Bank
Indonesia may synergize in promoting
SMEs; in this study, manufacturing SMEs in
particular.

The following facts can be used as a basis
for the necessity of implementing ERP in
furniture manufacturing SMEs, i.e.:
1. Companies with an annual turnover of
2.5 billion rupiah up to 10 billion rupiah
Proceeding 7
th
International Seminar on Industrial Engineering and Management
ISSN : 1978-774X

Selection Of Open Source ERP
DSS-84 (Wiwid Dolianto)
which have been categorized into
Medium Enterprises should have applied
ERP in their business processes.
2. Competition among furniture
manufacturing SMEs and competition
with large furniture companies:
Competition can occur in terms of
product variety (differentiation stretegy),
lower prices, better quality, faster
delivery, greater market share, and
service to customers will be maximized.
3. Competition occurs not only within the
country, but also between countries.
With the opening of the 2015 Asian free
trade, then certainly many goods
produced in other countries, especially
furniture, will enter the Indonesian
market share. With almost the same
price and quality, goods produced
abroad will enter Indonesia.
4. The ordering process that commonly
occurs in the furniture business where
customers/agents manually give
furniture model orders still seems slow.
Errors between the ordered goods and
the ready-made furniture often occurs.
This may occur where there is no basic
Standard Operating Procedure (SOP)
regarding the job or work orders in the
companys system.
5. Southeast Asian countries such as
Thailand, Malaysia, the Philippines and
China have widely applied ERP in their
SMEs. Although there are still some
unsuccessful stories in its application, at
least other countries have previously
applied the ERP system on SMEs in
their countries. Indonesian products
must dominate the domestic market.
Although it has a selfish impression, if
we want SMEs to progress further,
buying our own products would be very
good for the national economy.


5. CONCLUSION

In this study, an underlying conclusion
can be drawn regarding the business
process for furniture manufacturing SMEs as
well as an ERP module that is suitable for
the SME business process. The four
business processes of the research results
are financial function, material management,
marketing and customer, production and
distribution. Selection results on ERP open
source system is also obtained based on 6
criteria and 3 optional alternatives of open
source system. Compiere was selected as
ERP open source system with the highest
rate, Openbravo in second place with a non-
significant difference in weight. The results
of this selection is just the beginning stages
of ERP implementation in SMEs.
However, the implementation of ERP in
SMEs remains dependent from several
factors that become critical success factors
of ERP implementation in SMEs. With a
spirit of the desire to promote SMEs in
Indonesia and with the support of various
parties, Insha Allah the noble purpose in
order that Indonesia can be more
progressive by promoting SMEs will be
quicky carried out.
This study is limited to only furniture
manufacturing SMEs. With more and more
types of SMEs business and the expectation
of more progress on SMEs in Indonesia in
general, suggestions for further research
can be done on manufacturing SMEs in
other areas or SMEs in other areas of
business.


6. REFERENCES

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Queensland University Brisbane
Australia.
Proceeding 7
th
International Seminar on Industrial Engineering and Management
ISSN : 1978-774X

Selection Of Open Source ERP
(Wiwid Dolianto) DSS-85
(e) Caldeira, M., Cragg, P., Ward, J. (2003).
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